Ubuntu 8.04 Virtual Mail: user directories not creating, etc...

I followed the How-To for "the perfect server" and followed up with the "virtual mail w/ squirrel mail, etc." how-to. I am having some problems, they may be easy and I may be slow. I am fairly new to Linux as well.

Problem 1: The user directories are not being created when I mailx a message to the user.

And if an email is sent from a different working email server to the new server, I receive the "Mail Delivery System [MAILER-DAEMON@(mydomain).com] reply error message:
"...I'm sorry to have to inform you that your message could not
be delivered to one or more recipients. It's attached below..."

Problem 3: Squirrel mail fails with imap connection being dropped. I suspect this is a result of the directory not being created for the user.

I appreciate all help AND your patience with a "noob"

Thanks

EDIT: I have spent some more time scanning the forums and have determined at least one mistake I was making. I was trying to use my domain (lets call it thefqdn.com) as the virtual domain. I have tried to fix that with the /etc/host and the /etc/hostname folder and running:
hostname
and
hostname -f

I have reloaded the entire server (I have it down to 3 hours now) since I figured out that you can't have your primary domain virtual as well. With the reload, I am getting different errors, mostly involving the connectiing to the SQL tables.

I will hide the the localhostname the localdomain and the virtualdomain name but here is the most recent log info:

I think this is progress from before. So far I have checked the rights for user mail_admin, reset the password, verified it in all the /etc/postfix/virtual*.cf files, and flushed privileges in the SQL DB.